Question: In solving the exercises below, round all the dollar figures to TWO DECIMAL POINTS . 12 -1 The Middle East High-Tech Engine Corporation manufactures a

In solving the exercises below, round all the dollar figures to TWO DECIMAL POINTS.

12-1

The Middle East High-Tech Engine Corporation manufactures a range of high-performance engines.
The average selling price per unit is $80.
The associated variable cost is $50 per unit.
The fixed costs for the firm average $120,000 annually.
The annual interest expense for the company is $60,000.
The company currently sells 7,000 units per year.
The applicable corporate tax rate is 30%.
a. Calculate the EBIT break-even point in units for the company.
b. Determine the minimum dollar sales volume the firm must achieve to reach the EBIT break-even point.
c. Estimate the minimum price per unit the company must charge its customers to reach the EBIT break-even point.
d. Calculate the firms operating leverage and interpret its meaning.
e. Determine the firms financial leverage and interpret its meaning.
f. Estimate the firms combined leverage and interpret its meaning.

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